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Currently my class is studying Austrian economic theory, which is often compared in popular economic dialogue to Keynesian theory. I was wondering, which school has made more accurate predictions, and had more accurate models, Austrian or Keynesian?


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closed as primarily opinion-based by FooBar, EnergyNumbers, cc7768, The Almighty Bob, Jamzy Sep 18 at 2:47

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There are many schools of thought in economics and you cannot express it in just two. What about Ricardian economics and marxists economics? Not to mention that "believing" in a school of thought is the best way to show your ignorance about what economics is really all about. – Lasse Sep 17 at 5:59
@Lasse your comment does not address the question at all. It does not provide any clue to an answer, but only argues with points that are not in the question. – denesp Sep 17 at 7:11
@Lasse The statement in the post is "There are two major schools of economic thought, Keynesian and Austrian." It has never stated, that they are the only two. – Sogartar Sep 17 at 7:40
@PyRulez Could you please clarify what do you mean by "economically beneficial." Doy mean GDP growth and in what time frame? – Sogartar Sep 17 at 7:44
I agree with Lasse that the premise of the question is incorreect: Austrian is not a major school - it's a noisy fringe; and there are other major schools beside Keynesian. On the whole, the question is ill-defined. – EnergyNumbers Sep 17 at 7:54

2 Answers 2

I still think that this question is still a bit too broad, but the revisions made by the OP were useful, and permit at least some indicative data to come in:

First, the "empirical usefulness" of Keynesian, neo-Keynesian, meta-Keynesian, post-Keynesian, post-meta-Keynesian, after-Keynesian, beyond-Keynesian, etc models and theory strands, is one of the "everyday issues" in Economics, and there can be no single verdict on the matter -let alone the fact that in the last decade things has started to blur and merge with yet other strands, towards a possible wider synthesis.

As regards the Austrian School of thought, what constitutes "empirical implementation" differs widely among the School's followers. For example, quoting from Steven Horwitz's "The Empirics of Austrian Economics" (2012)

"(...) Austrians are trying to open up what counts as “empirical” to a broader range of evidence than is methodologically permissible in the mainstream of economics. Austrians can make use of econometric evidence in a limited and careful way (and a few have), but they are more likely to make use of primary source historical evidence and non-econometric quantitative data to make their arguments. Mises and others rightly pointed out that statistical correlations are purely historical data, just like the qualitative data we find interviews and newspapers, and therefore should have no greater role than those other forms of data in doing historical analysis."

Note the parenthetical comment "and a few have". The whole essay is I believe, worth reading, at least for informative purposes.

As an example of these "few" studies, one can download Robert Mulligan (2006) "An Empirical Examination of Austrian Business Cycle Theory", where one will find a paper with an econometric error-correction model, co-integration unit root and Granger-causality tests, etc.

But in all, I believe Horwitz describes the dominant approach in the Austrian School (i.e. "not-so-much-quantitative" empirics), which makes difficult to "quickly and easily" compare and assess their approach with any other approach in "mainstream economics".


'Beneficial' is a subjective term. So the answer depends on what you think an economic policy should do.

I tend to think more Austrian than Keynseian. But I am an American Libertarian at heart.

Keynes was British. As such when he talks about the government doing things what he was advocating was that the royal family should do those things. In America, the government is of the people, by the people, and for the people. We do not have the same class distinction that existed in England at the time of Keynes.

I hold that the Great Depression was made worse by the actions of the government. It was only WW2 that brought an end to the Depression. And it did so mostly by killing off so many people. With fewer people in the world, the existing wealth was more concentrated in those that survived.

Please refrain from posting subjective answers on this site. – FooBar Sep 17 at 7:05
I was pointing out that the question was subjective. Should we not answer questions that are subjective? – Jack Swayze Sr Sep 17 at 7:58
Why are you referencing politics? This is an empirical science question. – PyRulez Sep 17 at 9:35
Because Keynes was being political when he first espoused his ideas. He wanted the Royal Family to buy up the excess capacity of the British economy. You cannot separate Keynseian Economics from politics. Keynseian ideas are the justification used by governments to try to manipulate the economy. Even Richard Nixon said "We are all Keynseians now". – Jack Swayze Sr Sep 17 at 11:14

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